Kelly was hanged in 1880 in Melbourne and buried in an unmarked grave. A Victoria state government has ordered the developer who owns the site of what was Pentridge Prison to give remains identified as Kelly's to the family, the Herald Sun of Melbourne reported.
The developer, Leigh Chiavaroli, had planned to put the remains in a museum or a memorial to Kelly -- the son of an Irish convict transported to Australia. His gang was responsible for a series of killings -- including those of three police officers -- as well as robberies.
Ellen Hollow, Kelly's great grand-niece, said Kelly had asked that his family be permitted to bury him.
"Both the Kelly and King families are glad to have matters resolved and to be granted the variation to the exhumation license to have Ned's final wish granted," Hollow said.
Kelly's skull is missing, and Hollow urged whoever has it to return it.
Kelly has become a folk hero to many in Australia.